Dave Ramsey: Savings Advice You Would Regret Following


Dave Ramsey has become a superstar based on his financial views and budgeting methods. The 63-year old money maven who totes an estimated net worth of $200 million isn’t shy about hating on what he deems to be bad financial advice or sharing his own opinions. He doesn’t believe in any kind of splurging if you’re in debt (not even on some fun, here and there), he loathes credit cards and is a devout believer in the power of investing in mutual funds.

Ramsey has a lot to say about savings and which tactics best apply to the average American looking to be financially successful.

Here’s a look at a few pieces of savings advice that don’t align with Ramsey’s philosophies — and what fellow finance experts think of his approach.  

Bad Advice No. 1: Saving Cash in Envelopes Is Unwise  

You should not put all of your savings, or even a hefty chunk, into an envelope or any physical location. The vast majority of your savings should be kept in a high-yield savings account (HYSA), but stuffing some cash envelopes isn’t a bad idea. And Ramsey is a fan.  

“Dave Ramsey’s emphasis on zero-based budgeting, coupled with the cash envelope system, has resonated with many people seeking financial stability,” said William Giandoni, the mastermind behind Strategic Executive Solutions. “The concept revolves around assigning every dollar a specific purpose, then ensuring that every expense is accounted for and aligned with one’s financial goals.” 

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Bad Advice No. 2: Don’t Use Savings To Pay Off Your Mortgage 

Going against the widespread philosophy that mortgage debt is “good” debt, Ramsey recommends paying down your mortgage as early as possible. It’s a wise move, in the opinion of Ray Prospero, partner advisor at AdvicePeriod and a self-described fan of Ramsey. 

“Paying off your mortgage early can be a smart financial move as it reduces the overall interest paid on the loan, saving the borrower money over the long run,” Prospero said. 

But Prospero recognizes that this may not always be the right maneuver and that it depends on your situation and the nature of your loan. 

“In certain situations it may not make sense to pay it off early,” Prospero said. “I often have my clients look at the interest rate arbitrage — i.e., the interest they are paying versus any potential returns they might be able to get on their money. This arbitrage strategy was especially prevalent in the recent low-interest rate environment when mortgages were regularly under 3%. 

“Using this as an example, a person with a sub 3% mortgage, in my opinion, would be better off not paying off their mortgage early if they are able to go into a moderate portfolio that could consistently return 6% over time,” Prospero said. “Under this scenario, the borrower could potentially earn 3% a year more on their money than what the mortgage was costing them. While reducing debt is definitely important, low interest rates can present an opportunity to leverage your money more effectively in other strategies.”

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Bad Advice No. 3: Save for Retirement, Even When Buried in Debt 

Pretty much every financial expert strongly insists that you focus on saving for retirement early and aggressively. They’re not wrong, but Ramsey suggests it’s more important to pay off high-interest debt, if forced to choose between the two. 

“One of Dave Ramsey’s fundamental pieces of advice is that if you’re paying off debt, you should pause any contributions to your retirement,” said Zach Bromley, financial advisor at Broadway Graham Wealth Partners

“In some cases, this approach can make sense: If you have very high interest, unmanageable debt, it may be prudent to direct all extra cash towards debt repayment before contributing to retirement accounts,” Bromley said. “This can help pay off debt faster.”

But ignoring retirement contributions entirely while paying down debt isn’t always the best move. Why? 

“Retirement accounts like 401(k)s come with tax advantages and often employer matches that you miss out on if you contribute $0,” Bromley said. “This ‘free money’ can supercharge your nest egg. Completely stopping retirement funding can leave a big gap that becomes increasingly hard to close later in life. Balancing some debt repayment with reduced retirement funding may be more prudent.”

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